How much would it cost to build my home -The 3 critical factors

2.12.11

“How much would it cost to build my home?” is possibly the number one question builders get asked. Although there are several ways this question can be answered, there are 3 critical underlying factors that any answer must depend on.

The Size-Finish-Cost Triangle

When asked the inevitable question “How much would it cost to build my home?”, we find it helpful explaining the concept of the “Size-Finish-Cost Triangle”.

The Size-Finish-Cost Triangle dictates that when building any home, only two of the three elements of Size, Finish and Cost can be fixed – the third element must ‘float’ (ie. this third element is dependent on the other two).

Size refers to the total number of square meters of the home that is to be built – not just the building footprint. As an example, a house with a ground storey of 120 m2 and a second storey of 80 m2 would have a building size of 200 m2. Size is often a constraint dictated by the site where the home is to be built.

Finish refers to the level of finish in $/m2 that is appropriate to spend given the location and demographic of where the home is to be built. For example, an architecturally designed island villa would have a very different level of finish to a suburban multi-unit development.

Cost refers to the total budget a client can set aside for their project (don’t forget to include GST). Also be sure to keep in mind any allowances for architecture and design fees.

The concept of the Size-Finish-Cost Triangle is an early warning system. It is a simple check to see if the outcomes that are being requested are unreasonable or are within the ballpark.

Size-Finish-Cost Triangle Example #1

A client brief determined that the Cost and Size of their home must be fixed. This automatically determines the Level of Finish that can be applied to their home:

Cost fixed at $300k (excluding GST)

Size fixed at 240 m2

Therefore Level of Finish = $1,250 / m2 ($300k / 240 m2)

Size-Finish-Cost Triangle Example #2

A client brief determined that the Size and Level of Finish of their home must be fixed. This automatically determines the Cost of the project.

Size fixed at 240 m2

Level of Finish fixed at $1,800 / m2

Therefore Cost = $432,000 (240 m2 x $1,800 / m2)

Interpreting the Size-Finish-Cost Triangle

In example #1, above, the client may realise that the Level of Finish is far too low for the target market. In this case, either the Cost (budget) will need to be increased or the Size of the built area will need to be decreased.

In example #2, the client may realise that Cost is far too high for the target market. In this case, either the Size or the Level of Finish will need to be decreased.

Be wary if a developer, architect or builder tells you that they can fix all three elements the way that you want it – this is simply not possible and will most probably lead to surprises later in the build process.

Where can I get Level of Finish information?

Level of Finish rates can be found from several sources:

You could ask any Builder or Quantity Surveyor/Building Estimator for the rates they use.

Rawlinsons and Cordells (now known as Reed Construction Data) are also two national quantity surveying firms who publish industry construction estimates, updated quarterly. These are very detailed and can be expensive to purchase – although once again, your builder or quantity surveyor will most probably have access to these guides.

If you wanted to do your own groundwork, you might also find quantity surveyor BMT & Associate’s online construction cost calculator to be a useful guide. BMT also produce a regular newsletter with updated Level of Finish rates for specific building types (although the data published is for Sydney and will need varying depending on your region):http://www.bmtqs.com.au/construction_cost_calculator.htm

Conclusion

The concept of the Size-Finish-Cost Triangle is an early warning system that is helpful in answering the question: “How much would it cost to build my home?”.

It is not intended to be used to fix contract prices at the commencement of a project but is a simple check to:

See if the outcomes being requested are unreasonable or are within acceptable ranges

Define which two elements are the most important priorities for the client

Decide on any adjustments that may need to be made early in the project